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Low Carbon Fuel Standard: Higher Transportation Costs, Fewer Jobs

CEA recently commissioned a study, released today, on the likely impact a Low Carbon Fuel Standard would have if it were to be adopted nationwide. The study, which was conducted by Charles River Associates, confirms many of CEA’s concerns about higher fuel prices and a likely shift away from some of the country’s most important sources of fuel, such as crude oil from Alberta, Canada.

However, by looking at the nationwide impact of this policy, which has already been adopted in California and is being seriously considered in many other states, the study provides a more complete picture of the economic devastation that could result.

“Adoption of a nationwide low carbon fuel standard will result in a price shock that will dramatically increase the cost of transportation for consumers and have long term effects on the economy by increasing transportation costs for all goods,” the report finds. It forecasts a rise of 30% to 80% in the cost of transportation fuels within five years after the time the low carbon fuel standard is implemented. Largely as a result of those dramatically higher costs, at least 2.3 million jobs and as many as 4.5 million jobs would be lost by 2025, the study finds. Importantly, that projection represents a net loss in jobs, and factors in any jobs that would be created as a result of the new policy.

The report contains many other important details, including how a nationwide low carbon fuel standard threatens to reduce wages and significantly increase household costs. But one of the most stunning conclusions is the damage it would inflict on the nation’s already struggling refining industry.

The study stresses that refiners are “affected doubly by the low carbon fuel standard,” which reduces the share of petroleum-based fuels used in the production of motor fuels and also reduces total motor fuel use. As a result, were a low carbon fuel standard to be adopted nationwide, refinery operations would fall between 27% and 40% by 2035 and up to 55 refineries would close.

One of the major problems with this policy is the lack of a sufficient supply of alternative fuels to offset the use of petroleum-based fuels to power the transportation industry. Ethanol is of limited use in this regard. It runs into a “blend wall” problem since fuel used in vehicles can only contain 10% ethanol. Electric vehicles face major infrastructure requirements for large-scale penetration.

“It is fair to say that by the year 2025, it is impossible to bring to market sufficient quantities of new fuels with sufficiently low-emission factors to meet the low carbon fuel standard without reducing the total amount of transportation fuel consumed,” the study finds.

And let’s also keep in mind that all this economic damage would be inflicted by a policy that is less likely to reduce emissions and more likely to increase our dependence on Mideast oil.

David Holt: Help preserve jobs in the Gulf Coast

The following op-ed from David Holt, President of Consumer Energy Alliance, appeared on The Hill’s Congress Blog website here.

Last month when President Obama imposed a six-month moratorium on deepwater drilling in the Gulf of Mexico, his decision threatened the livelihood of tens of thousands of workers in the Gulf States. Today, CEA is pleased to see strong bipartisan support on Capitol Hill to lift the six-month offshore drilling moratorium including, the introduction of critical legislation in the House and Senate to this effect.

According to the Louisiana lieutenant governor’s office, one in three jobs in the coastal communities surrounding the Gulf of Mexico is directly or indirectly related to the oil and gas industry. For example, helicopter companies in Lafourche, Louisiana transport approximately 15,000 workers each month to offshore oil sites. Nearly 1,200 truckers supply food for these same 15,000 workers. These supportive jobs will be lost if the rig workers can no longer operate in the Gulf.

Further, direct manufacturing companies for the oil and gas industry will be severely impacted. The reduction in demand of products from these manufacturers will mean fewer sales and more costs to supportive jobs throughout the supply chain (i.e. steel workers, transport, service industry, etc.). One such manufacturing company based out of Houston, Texas, ATP Oil & Gas Corporation, expects to incur an additional cost of $30 million due to a suspension of their operations – a cost that would otherwise not have been sustained. Others, such as Otto Candies LLC and Aker Solutions, are expected to drop hundreds of jobs because the moratorium.

Even more startling, halting all rig activity in the Gulf jeopardizes up to $330 million a month in household income — at a very fragile time for the national economy and a particularly difficult time for the Gulf economy, which is already suffering from a loss of tourism and fishing. The Louisiana Midcontinent Oil and Gas Association estimated that the moratorium will reduce domestic energy production by 80,000 barrels per day.

Consumer Energy Alliance recognizes President Obama’s decision was made in direct response to the unprecedented disaster in the Gulf of Mexico but does not believe the unintended consequences of this policy have been properly considered or measured.  Like the President, CEA supports safer drilling and holding responsible parties accountable. But the fact is that these rigs that are being forced to shut down have exemplary safety records and are being unnecessarily penalized, as are the people of the Gulf States. As we continue to search for solutions to this crisis, and to make sure we have safety measures in place so that nothing like this ever happens again, we must also join together to avoid rash legislative decisions that will ultimately only make matters worse. We are running the risk of turning an environmental disaster into an economic catastrophe.

We applaud responsible, common sense approaches – like the bills introduced in Congress by U.S. Rep. Bill Cassidy (LA), Senator David Vitter (LA), and U.S. Rep. Pete Olson (TX) – that rightfully overturn President Obama’s deepwater drilling moratorium and help struggling communities in the Gulf region get back on their feet.  From Louisiana Governor Bobby Jindal to Senator Mary Landrieu to La Fourche Parish President Charlotte Randolph, all are saying the same thing: a continuation of the six-month oil & gas drilling moratorium in the Gulf of Mexico will do far more harm than good.

New Study: Nationwide LCFS Would Send Gasoline and Diesel Prices Skyrocketing, Wipe Out Millions of American Jobs

Charles River report quantifies real-world impacts on U.S. consumers and workers

WASHINGTON — The imposition of a nationwide Low-Carbon Fuel Standard (LCFS) would boost average U.S. gasoline and diesel prices by as much as 80 percent within five years of the start of the program and up to 170 percent within 10 years, according to a study issued today by Charles River Associates.

Assuming a nationwide LCFS program is implemented in 2015 with gasoline prices at today’s level, this would result in an average national price for gasoline of nearly $5 per gallon in 2020 and close to $7.50 a gallon by 2025.

The study also projected that a nationwide LCFS program starting in 2015 would:

  • Cause an estimated net loss of 2.3 million to 4.5 million American jobs by 2025 from baseline levels. As many as 1.5 million of these jobs would be in the manufacturing sector, while as many as 3 million would be in the service sector. These job cuts reflect the cumulative impact businesses would face from reduced consumer demand and higher costs for goods and services caused by an LCFS.
  • Drive down household annual purchasing power by between $1,400 and $2,400 by 2025.
  • Cause the U.S. Gross Domestic Product to decline by approximately 2 to 3 percent, or $410 billion to $750 billion, by 2025.

Charles River Associates, a Boston-based global research firm that specializes in economic modeling and analysis, conducted the study for Consumer Energy Alliance (CEA).

“Any way you slice the data, the future projected by this study is a frightening one – higher fuel prices, fewer jobs, and lower consumer purchasing power,” said Michael Whatley, vice president of CEA and a leading policy expert on the LCFS. “This nightmare scenario is clearly one that policymakers in the United States should avoid at all costs.”

Added Whatley: “Intuitively, it’s always made sense that policies such as the Low-Carbon Fuel Standard, which seeks to restrict Americans’ access to secure and affordable sources of energy, would result in higher fuel costs and fewer jobs. But with the release of this study, we can now quantify those impacts under several different scenarios, and understand how they apply to different regions across the United States.”

The LCFS would prevent certain sources of reliable, affordable petroleum from being converted into fuels such as gasoline, diesel fuel, kerosene and heating oil. The theory justifying the LCFS says that if the supply of these resources is cut, enough lower-carbon alternatives will arrive on the market to replace them – even if sufficient amounts are currently considered decades away from commercial realization.

“The stated purpose of the Low-Carbon Fuel Standard is to be technology forcing, and to bring new fuels into the market,” the report’s authors write. “But the LCFS becomes a policy that drives large changes in consumer behavior and in new vehicle fuel economy because the targets are beyond reach with foreseeable fuel technology. … Thus the LCFS is turned into a policy that in effect rations gasoline until the required improvement in emissions per gallon is met.”

A federal LCFS was added to the Lieberman-Warner climate change bill in 2008 and proposed as part of the Waxman-Markey bill in 2009 (although the LCFS provision was removed before the bill was passed by the House). Supporters of a national LCFS continue to work for its enactment, even as proposed programs are being developed in several states and regions.

Click HERE to access the Charles River study. And for more information on the LCFS, please visit http://secureourfuels.org

CEA: Now is Not the Time for $11 Billion Tax on Those Who Find, Deliver – and Consume – Energy in America

CEA president sends letter to every member of U.S. Senate laying out consequences of potentially devastating new tax

HOUSTON – June 16, 2010   Crude oil prices are on the rise again, and a significant portion of U.S. offshore energy production is currently on the shelf owing to a deepwater moratorium put in place by the administration.

Against that backdrop, Consumer Energy Alliance (CEA) president David Holt sent a letter to every member of the U.S. Senate this week urging the lawmakers to consider the consequences of imposing a new, and potentially crippling $10.8 billion tax on those who find, produce, deliver – and consume — affordable energy in America.

The text of Holt’s letter to U.S. Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, is included below (and accessible online here):

June 15, 2010
The Honorable Max Baucus
United States Senator
511 Hart Senate Office Building
Washington, D.C. 20510

Dear Senator Baucus:

Consumer Energy Alliance (CEA) is writing regarding the American Jobs and Closing Tax Loopholes Act of 2010 (the “Tax Extenders bill”), which will be taken up by both the House and Senate in the near future. CEA broadly supports efforts to encourage energy efficiency and the development of alternative and renewable energy through targeted tax incentives such as those provided in this legislation. We are concerned, however, that provisions in the legislation will amount to a massive tax increase on the truckers, airlines, farmers, motorists, and energy consumers of America.

CEA is a nonprofit, nonpartisan organization made up of 145 affiliate members and more than 280,000 grassroots supporters who support the thoughtful utilization of energy resources in order to help ensure improved domestic and global energy security and stable prices for consumers.

As an organization that is devoted to the development of all energy resources – including alternative, renewable and conventional – CEA enthusiastically applauds the inclusion of provisions extending tax credits for the production of biodiesel, renewable diesel, biomass-based electricity and alternative fuels or alternative fuel mixtures in the Tax Extenders package. The use of targeted tax credits such as these will foster efforts to develop alternative and renewable fuels and reduce energy consumption, which will help reduce our dependence on imported energy and reduce energy-related pollution.

However, CEA is deeply concerned about provisions of this legislation that would increase the taxes that fund the Oil Spill Liability Trust Fund. The Joint Tax Committee has estimated that raising these taxes from 8 cents per barrel to 32 cents per barrel would amount to a $10.8 billion tax increase on American energy production.

Raising taxes on oil production will have a disproportionate impact on small and independent producers, which will decrease investment in oil production and result in higher crude prices. These higher oil prices will lead directly to higher home heating oil, gasoline and diesel prices – costs which will be borne by energy consumers, as we learned during the energy price spikes of 2008. During the run-up, historically high gasoline, diesel and jet fuel prices led to the closure of over 4,200 trucking companies, as well as forcing more than a dozen airlines out of business and eliminating the jobs of 360,000 workers.

Consumer Energy Alliance respectfully requests your support for amending the Revenue Offsets provisions raising the Oil Spill Liability Trust Fund in the Tax Extenders bill to ensure that the language provides appropriate targeted tax incentives to promote renewable and alternative energy development and energy efficiency – without enacting a $10.8 billion transportation fuels tax increase that would harm American consumers.

Sincerely,

David E. Holt
President
Consumer Energy Alliance

Bay State LCFS Could Prevent Secure, Canadian Energy from Getting to Mass.

The following op-ed from Michael Whatley, Executive Director of Southeast Energy Alliance, appeared on the Secure Our Fuels website here on June 14, 2010.

More than 2,100 miles separate the Canadian province of Alberta from the commonwealth of Massachusetts — and with no direct commercial flights connecting the two, it tends to feel even a whole lot further away than that.

But maybe the two are a lot closer connected than meets the eye. Consider that in March alone, Massachusetts imported 2.8 million barrels of petroleum products from Canada, including fuels derived from Alberta oil sands, the second largest known source of oil in the entire world. Resources developed, processed, refined and eventually delivered to the Boston Harbor – in the forms of gasoline, diesel fuel and home heating oil, upon which nearly one million Bay State residents depend to keep their homes warm during the winter.

Today, I have the privilege to be in Boston to participate in an energy summit with the environment minister of Alberta, on hand to discuss new ways that his province can partner with New England to achieve shared goals related to security, the economy and the environment. The one big challenge to that progress? The imposition of a Low-Carbon Fuel Standard (LCFS), a policy being developed right here in Boston that would greatly reduce your state’s access to Albertan energy, while greatly increasing your reliance on suppliers half-a-world away.

Last December, Gov. Patrick joined 10 other governors in signing an agreement on an LCFS. Proponents argue it will improve the environment by lowering the carbon content of your fuels, all without costing consumers and motorists a thing. The reality, though, is that this issue is a lot more complex than those proponents suggest – with consequences that will significantly Bay State access to secure, affordable Canadian energy.

Under the LCFS proposal being considered, transportation and home heating fuels would be given a carbon value based upon emissions produced over their lifetime. All fuels require energy for their production — but so-called heavier crudes (such as those found in Alberta) receive higher scores because they require marginally more energy to produce. Under an LCFS, these are the fuels targeted for elimination.

But as study after study has shown, the carbon intensity of oil derived from Alberta’s oil sands is very much in line with the intensity found in a host of other crude sources, including in the United States – which is why study after study has also shown that greenhouse gas emissions aren’t actually lowered by the LCFS.

The reality is, the oil sands’ environmental footprint continues to shrink each and every year. Carbon dioxide emissions from the production of oil sands has come down by an average of 39 percent per barrel since 1990.  In some facilities, the reduction has been as high as 40-45 percent.

In 2007, the government of Alberta implemented greenhouse gas regulations requiring a 12 percent reduction in emissions per barrel. Emitters can meet the reduction target, acquire approved offsets, or pay $15 for every excess ton of emissions into a fund supporting research on improving the environment. As of 2009, over $186 million was paid into that fund, with many millions more expected to be deposited this year. Additionally, the Alberta and Canadian governments, along with industry, have invested over $10 billion in carbon capture and sequestration projects to reduce carbon emissions from energy production.

Alberta has taken significant strides to reduce the environmental footprint of oil sands production, and has the ability today to provide essential energy resources to the northeastern United States from a friendly, reliable trading partner. We’re hoping today’s energy forum brings some of those issues to light.

Low Carbon Fuel Fallout

CEA has previously highlighted how the United States’ reliable supply of fuel from Canada is threatened by Low Carbon Fuel Standards, which purport to favor cleaner fuels but often use formulas that effectively favor the oil produced in the Middle East.

Those concerns were realized last week when lawmakers in Bellingham, Washington voted to phase out fuels from the Alberta tar sands.

Currently, four refineries near the Pacific Northwest city of Bellingham process the crude oil from Alberta, which has fallen out of favor because of its relatively high carbon content. As we’ve already noted, the formulas used to determine carbon content are usually too simplistic, or just inaccurate. In the case of the oil from Alberta, policymakers often overlook one critical detail: that it is produced very close to home and therefore requires very little fuel to be transported to end users.

Any U.S. city that would reject fuel from a friendly, neighboring country would be acting in a shortsighted manner that would most likely open the door to greater fuel imports from the Middle East and other far away places. When the city of Bellingham, Washington, located so close to the Canadian border, takes such an action, it really underscores how some of the most well-intentioned energy policies defy logic.

Although sending Canadian oil to the U.S. Pacific Northwest is particularly efficient, the oil producing sites in Alberta are close enough that it makes sense from both an economic and a fuel efficiency perspective to consume that oil in many parts of the U.S. The new Alberta Clipper pipeline could help ensure a steady supply of Canadian fuel but because of the growing movement in many states to adopt low carbon fuel standards, that Canadian oil could end up being exported to Asia.

Alberta’s Environment Minister Tells Boston Audience of the Perils of an LCFS

CEA joins Environment Minister of Alberta, Consumer Groups and Policy Experts for Boston Forum on Low-Carbon Fuel Standard (LCFS)

BOSTON, Mass. – June 14, 2010 The environment minister from the Canadian province of Alberta participated in a regional energy conference in Boston today that, among many important issues, examined the potentially adverse consequences of imposing a Low-Carbon Fuel Standard (LCFS) on the Northeast, a policy that could greatly reduce the region’s access to secure and affordable energy from Alberta.

“Alberta is committed to reducing the environmental impact of oil sands development, and we have already made great strides.  We are uniquely able to provide safe and secure energy resources that are essential to the northeastern United States and beyond,” said Alberta Environment Minister Rob Renner. “We are not asking for special treatment, only fair treatment. When one considers the full life cycle of a barrel of oil, the carbon intensity of Alberta’s oil sands is very much in line with many other sources of crude, including those in the United States.”

An improperly designed LCFS in the Northeast could discriminate against reliable, affordable sources of Canadian fuel and raise the prices of gasoline and diesel, forcing New England states to increase imports from foreign, far-away suppliers, participants discussed today. Massachusetts imported more than 2.8 million barrels of petroleum products from Canada in the month of March alone, according to the Energy Information Administration – supplies that would be put in danger under an LCFS.

“During this time of unprecedented economic uncertainty, instituting a region-wide policy designed to drive up gas and diesel prices and make essential energy commodities such as home heating oil a whole lot more scarce doesn’t make a whole lot of sense,” said Michael Whatley, vice president of Consumer Energy Alliance (CEA) and the emcee of the forum today. “Maybe the more unfortunate reality of the LCFS, though, is that it won’t do a thing to reduce global concentrations of greenhouse gases in the atmosphere. But that’s the LCFS: All pain, no gain.”

This afternoon’s regional low carbon fuel forum, hosted by CEA, drew the participation of the environment minister of Alberta, as well as a number of local and regional stakeholders, consumer groups and policy experts to discuss the regional impact of an LCFS, an initiative supported by Gov. Patrick and being pushed by the Boston-based group known as the Northeast States for Coordinated Air Use Management (NESCAUM).

Addressing the forum earlier today, Renner provided participants with an overview of the latest technological advances being deployed to develop Alberta’s oil sands in an environmentally sensitive way, highlighting among many other important points that CO2 emissions from the production of oil sands has come down by an average of 39 percent per barrel since 1990.

For more information, please visit http://secureourfuels.org

New Wireless Smart Meters in Texas

Remember those TV ads that NBC likes to run (Green is Universal) with helpful tips reminding us that we’re using energy just by keeping our computers and cell phones plugged in even when they are not in use? We won’t need those reminders much longer.

The next killer wireless apps are those that will actually help us monitor our energy use and hopefully conserve power by informing us at home about our energy usage.   That’s the goal of the new wireless meter readers that are allowing homeowners to track and control their energy use via their home Internet and wireless devices.

Texas is now home to the largest role out of these smart meters as almost a quarter-million homes will have them installed over the next five years. The “smart meters” will be able to measure energy usage every 15 minutes.
In addition to empowering homeowners to track and conserve energy, the smart meters also help the providers manage demand during peak times, and help providers adjust pricing based on demand.

But some say that it not enough and that meters give the consumers the feel of control without real control.  According to this article the real killer app of the future will be a home energy dashboard like the ones offered by Tendril.

The dashboards are connected to energy outlets throughout the home like thermostats and electricity meters and outlets and display ongoing information about consumption levels. This real time information empowers consumers to track their energy usage on a very detailed level helping them to not only save money but also to reduce overall load on the system.

The real value of “smart grid” technologies, and how effective they will be in terms of conservation and price control remains to be seen.  But the interest in this area by a whole host of small and large technology companies we hope means that this is only the beginning of better products to put conservation in the hands of consumers.

CEA Urges Administration to Reconsider Deepwater Offshore Moratorium

CEA president applauds decision by 8 members of Interior’s review panel “to step up and speak out” against moratorium

HOUSTON – June 10, 2010 Eight members of the Interior Department’s 30-day offshore review panel sent a letter to Louisiana’s governor and U.S. senators this week suggesting that although they “broadly agree with the detailed recommendations” included in the May 27 report, “we do not agree with the six month blanket moratorium” on new deepwater exploratory wells in the Gulf of Mexico. Copies of both the cover letter and the reviewers’ statement are available on CEA’s website.

Consumer Energy Alliance (CEA) president David Holt issued the following statement subsequent to reviewing the notice.

“Every one of these eight experts were recommended to sit on this panel by the National Academy of Engineering, and neither that recommendation nor their appointment to this review board were things that happened by accident. These are folks who understand the realities of offshore energy exploration in America today, and whose commitment to ensuring it’s pursued in a balanced and responsible manner is well known and well established.

“As we seek to understand more about what contributed to the tragedy in the Gulf, CEA recognizes that safety is the highest priority for the administration, the industry, and American energy consumers.  That’s why we stand shoulder-to-shoulder with the president as he and his administration seek to gather all the facts about what went wrong that day, and how we can ensure it never happens again. But as we engage that critical work, we shouldn’t turn our backs on the thousands of men and women in the region whose lives and livelihoods are inextricably linked to safe operations in the Gulf.

“In imposing this moratorium and idling these workers, this policy will have the effect of placing another crippling burden on the citizens of the Gulf.  Recent reports suggest that lost wages could exceed $330 million for every month the moratorium continues, on top of billions in lost revenue for state and local governments. The decision by these eight members of the Interior review panel to step up and speak out is one that CEA both applauds and supports. Armed with these new perspectives, it’s our hope the administration reconsiders its decision with respect to offshore exploration.”

NOTE: Dr. Richard Bea, professor of engineering at the University of California-Berkeley, told the New Orleans Times-Picayune yesterday that the “moratorium was not a part of the … report we consulted-advised-reviewed … Word from DOI was it was a W(hite) H(ouse) request.” The eight members of the Interior Department’s 30-day review panel who sent the letter this week represent more than half of the entire committee (15 members in total).

CEA Issues Statement on Atlantic Offshore Wind Energy Consortium

HOUSTON — June 9, 2010 Consumer Energy Alliance (CEA) President David Holt issued the following statement regarding yesterday’s announcement by the U.S. Department of the Interior regarding the creation of the Atlantic Offshore Renewable Energy Office and Atlantic Offshore Wind Energy Consortium:

“The formation of the Atlantic Offshore Wind Energy Consortium and Atlantic Offshore Renewable Energy Office, as agreed upon by the U.S. Department of the Interior and the governors of 10 East Coast states, is an important step forward in achieving a balanced energy policy for America.

“Consumer Energy Alliance commends Secretary Ken Salazar for his implementation of these initiatives, which will play a vital role in developing energy resources along the Atlantic coast of the United States and expanding the nation’s renewable energy portfolio. New domestic offshore energy projects can lead to more jobs, improved energy diversity, increased national security and a better future for all Americans.

“The Consortium – which includes CEA’s Southeast Chapter States of Virginia and North Carolina — will empower the states of the Atlantic Coast to voice opinions, discuss regional goals and reach consensus on wind energy projects that will benefit not only their home states, but the entire country. Likewise, the Atlantic Offshore Renewable Energy Office, to be headquartered in Virginia, will fulfill an important need in developing American resources in its essential role of coordinating and expediting development of renewable energy projects, including wind and solar.”

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